2019 (8) TMI 1059 - AT - Income Tax

Disallowance of business loss - sale of shares of Comfort Fincap Ltd. - bogus loss - HELD THAT - Assessee has purchased and sold shares through recognized broker. Copies of Contract notes, copies of payment through banks, De-mat statement and other evidences were filed in support of the genuineness of the transactions AO has disallowed the claim of assessee on the sole reason that this scrip was suspended by Calcutta Stock Exchange from April, 2013 onwards. However, it has been brought on record by the assessee to demonstrate that the scrip is being traded even today. Moreover, from the contract note placed at Page 34-36 PB it is noted that the transaction took place at Bombay Stock Exchange and not at Calcutta Stock Exchange. So the foundation of the reason given by the AO is based on wrong assumption of fact and so is erroneous. Thus, the basis on which the Assessing Officer has made the disallowance, cannot be upheld. CIT(A) relied on the so-called rules of suspicious transactions and confirmed the order of the Assessing Officer. In my view, such disallowance cannot be sustained. Thus delete this addition as the entire addition was made on wrong assumption of fact - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of business loss on the sale of Comfort Fincap Ltd. by CIT(A).

Analysis:
1. The appellant contested the disallowance of a business loss on the sale of Comfort Fincap Ltd. by the CIT(A). The AO disallowed the claimed loss of ?6,89,049 on the sale of 5000 shares of Comfort Fincap Ltd., citing suspicious transactions and surrounding circumstances.

2. The appellant argued that the transactions were executed on the Bombay Stock Exchange, not the Calcutta Stock Exchange, as alleged by the AO. The appellant provided documentary evidence, including contract notes, bank statements, and DEMAT account details, to support the genuineness of the transactions.

3. The appellant referenced similar judgments by the Kolkata Tribunal where losses in Comfort Fincap Ltd. were allowed, emphasizing the reliance on preponderance of probability and suspicious transactions by the CIT(A). The appellant highlighted that STT was paid on all transactions and the disallowance was solely based on suspicion.

4. The Tribunal noted that the appellant submitted all requested evidence, purchased and sold shares through recognized brokers, and conducted transactions on the Bombay Stock Exchange. The AO's disallowance based on the suspension of the scrip by the Calcutta Stock Exchange was deemed erroneous as the scrip was still being traded.

5. Relying on case law, the Tribunal held that the addition made by the AO was unjustified due to the lack of specific evidence against the appellant. The Tribunal directed the AO to allow the claimed loss on the Comfort Fincap Ltd. shares, ultimately ruling in favor of the appellant.

This detailed analysis covers the issues involved in the legal judgment comprehensively, addressing the arguments presented by both parties and the Tribunal's final decision.